10:00 PM PDT on Saturday, July 30, 2011
By IMRAN GHORI and DUANE W. GANG
The Press-Enterprise

Over the course of San Bernardino County’s four-year legal battle with Colonies Partners, county officials say the company’s settlement demands escalated from an initial $25 million to a combination of cash and land that included a parcel potentially worth hundreds of millions of dollars.

Ultimately, to compensate the company for flood-control easements on land it owned in Upland, the county agreed in November 2006 to pay the Rancho Cucamonga developer $102 million — a figure the county’s attorneys and several officials say they consider excessive and unsubstantiated.

The deal is now the subject of a criminal investigation that led to a 29-count indictment in May against Colonies Partners principal Jeff Burum; former Supervisor Paul Biane; Mark Kirk, former chief of staff to Supervisor Gary Ovitt; and Jim Erwin, a former assistant assessor who was a consultant for Colonies at the time.

On Friday, Burum’s attorney, Stephen Larson said Colonies Partners was not responsible for delays in reaching a settlement — delays that he said increased costs and damages to the company.

“We always believed a fair and mediated settlement was in the interest of the Colonies and the county,” Larson said by telephone. “I think there was a huge delay in the county realizing their liability.”

In an April letter to prosecutors, John Vandevelde, one of Burum’s attorneys, said that Colonies offered to settle the dispute in January 2002, before the company sued the county. According to the letter, the company offered to donate to the county the disputed flood basin and share equally in the flood-control improvement costs.

In addition, the letter said that before the case went to trial for the first time, the company offered to accept a $5 million settlement along with 100 acres of land elsewhere in the county

Former Supervisor Jon Mikels, who represented Upland, was strongly opposed to settling, and the county rejected the offers, witnesses told the grand jury.

Larson has said the evidence prosecutors presented to the grand jury was one-sided and unfair. Burum committed no crime, he said.

‘No documentation’

In March 2002, when Colonies first sued the county, the case was solely about whether the county had easement rights on the Upland property, testified Deputy County Counsel Mitch Norton, one of the county’s lead attorneys in the case over the past decade.

No damages estimate was initially included in the litigation, although the company had previously requested $25 million to cover its costs in constructing a flood-control basin on the property, Norton said.

Pat Mead, the county’s public works director at the time, testified that the county did not believe the $25 million figure and repeatedly asked for verification numerous times to no avail. His department oversees the county flood control district, the agency sued by Colonies.

“I did not believe they spent anywhere as much as they claimed on it,” Mead said

Mead said he looked at aerial photos of the site and estimated that Colonies spent $3 million to $5 million building the basin — a figure he made known to the board and the county’s attorneys.

In the early stages of the lawsuit, the board sided with the county’s attorneys in fighting the lawsuit and opposing a settlement. That changed in November 2002 after Biane was elected, former Supervisor Bill Postmus testified.

Biane was a strong advocate for settling with Colonies, Postmus said.

Postmus pleaded guilty in March to accepting bribes to support the settlement. He is cooperating with prosecutors.

In the grand jury transcripts, witnesses describe discussions starting in 2003 on a host of different settlement figures that kept rising through 2006: $8 million, $10 million, $33 million, $50 million to $60 million, $77 million and $100 million.

In separate grand jury testimony in September 2009, Biane said the county’s first offer was $10 million — although former Supervisor Dennis Hansberger remembers the county’s first offer as $8 million.

The county’s offer soon grew to $33 million just before the case was set go to trial before Judge Peter Norell. It’s not clear from witness testimony which side rejected the settlement offers.

When asked to explain why the county increased its offer, Biane said it was due to Colonies’ growing confidence as the case went forward.

Legal rulings

After Norell ruled in favor of Colonies, Hansberger testified, Colonies raised its price to $40 million. Biane names figures between $50 million and $60 million.

Despite the legal setback, the county’s attorneys testified that they were confident the county would prevail in an appeal and advised against settlement.

“The offer Mr. Biane was making went up and up and up and it went up even when the county was winning,” Deputy Attorney General Melissa Mandel in a summation to the grand jury.

In March 2005, just before an appeals court reversed the trial court ruling, Biane and Postmus negotiated a $77 million deal with Colonies without the presence of the county’s attorneys.

That deal “blew up,” according to Postmus, after a memo from the county’s attorneys was leaked to The Press-Enterprise , making a settlement politically untenable at the time.

At some point, several witnesses testified, Colonies sought to include 1,200 acres near Rancho Cucamonga as part of a settlement deal. The flood control property, surrounded on three sides by housing tracts and U.S. Forest Service land, is the largest remaining undeveloped property in that area, officials said.

Witnesses are not clear on when the parcel became part of the discussions; some said as early as 2003, and others testified it may have been in 2005.

But they all agreed that it was a potentially valuable development opportunity that Burum wanted.

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